ECON102: Principles of Macroeconomics

Unit 1: Introduction to Macroeconomics
*To build a solid house, one needs a solid foundation. In
macroeconomics, this foundation centers on a few key questions: How do
we measure overall economic activity? What are the relevant aggregates
(totals) needed to measure overall economic activity? What role do
governmental and other institutional policies play in an economy? What
are some important components that affect the whole economy? Because
macroeconomics concerns itself with so many different parts of the
economy, it is critical to focus on these key questions and ideas before
moving on to the parts themselves.

This first unit outlines important concepts and relates them to the
economy as a whole. We will first address growth, unemployment, and
inflation as the three central concerns of macroeconomics. Next, we
will identify critical public policies, such as money creation (monetary
policy) and taxes and spending (fiscal policy), exploring their
respective effects on an economy. Finally, we will take a look at a
diagram that shows the circular flow of the resource market (income) and
the product market (goods and services).

In this unit, you will also learn how macroeconomics developed in the
1930s as a result of a debate between economists, who believed that
market and price mechanisms should be able to adjust in order to resolve
economic downturns and depressions, and others, who believed periodic
economic dislocations could be managed through the use of public
policies and government intervention. This debate is as relevant today
as it was in the 1930s.*

Unit 1 Time Advisory
This unit should take approximately 10.75 hours to complete.

☐ Subunit 1.1: 5 hours

☐ Sub-subunit 1.1.1: 3 hours

☐ Sub-subunit 1.1.2: 2 hours

☐ Subunit 1.2: 2.25 hours

☐ Subunit 1.3: 2.25 hours

☐ Subunit 1.4: 1.25 hours

Unit1 Learning Outcomes
Upon successful completion of this unit, the student will be able to:
- Describe the characteristics of demand and supply, and apply the
demand and supply model.
- Define real gross domestic product and identify the phases of a
business cycle.
- Define inflation and deflation, and explain how each affects the
price and economic growth of an economy.
- Articulate why the price-level changes and how it can affect
economic stability.
- Explain how unemployment is calculated and measured in the United
States.
- Demonstrate an understanding of the role of the government in the
economy.
- Identify the components of the macroeconomy and relate them to the
circular flow diagram.

Link: Professor Robert Schenk’s *CyberEconomics*: [“Overview:
Introduction to
Macro”](http://ingrimayne.com/econ/EconomicCatastrophe/OverviewA6.html)
(HTML)
Instructions: Read the introduction and then select “Different
Tools” on the left-hand tab to read about the difference between
microeconomics and macroeconomics. After reading the article click
on the “Review” tab to assess yourself.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

1.1.2 Microeconomic Connections and FoundationsNote: This sub-subunit will revisit concepts you learned in ECON101:
Principles of Microeconomics. This section will review the basic model
of demand and supply, the concept of equilibrium, and the way markets
operate in an economy. Do not rush through these readings; it is
important to fully understand these topics. It may also be helpful to
practice sketching demand and supply graphs on your own in order to see
how equilibrium values change with curve shifts.

Instructions: Click on the hyperlinks for Test 1 and Test 2 beneath
Chapter 3 and complete each assessment. Once you have selected an
answer choice, a note at the bottom of the screen will indicate
whether or not your choice was correct.

Terms of Use: Please respect the copyright and terms of use
displayed on the web pages above.

Instructions: Read the introduction and then read the first section
in its entirety. This material will provide you with a general
understanding of how the present financial crisis can be
contextualized by studying macroeconomics, which is the analysis of
aggregate values of economic variables.

Instructions: Read this material fo an overview of the concepts
that are associated with the business cycle. The business cycle
provides information on the causes and characteristics of the
economic problems associated with unemployment and inflation.

Instructions: Read the definition of monetary policy presented on
this page to familiarize yourself with the basic objectives of
monetary policy. Click on the “History” icon on the left-hand side
to see how monetary policy has developed over time.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Reading: U.S. Department of State: Christopher Conte and Albert R
Karr’s An Outline of the U.S. Economy: “Chapter 7: Monetary and
Fiscal Policy”
Link: U.S. Department of State: Christopher Conte and Albert R
Karr’s An Outline of the U.S. Economy: “Chapter 7: Monetary and
Fiscal
Policy” (PDF)

Instructions: Read this article by Christopher Conte, a former
editor and reporter for the Wall Street Journal, and Albert R.
Karr, a former Wall Street Journal reporter. This article
provides an overview of the fiscal and monetary policy of the United
States. Reflect on how these policies might be coordinated to
achieve macroeconomic objectives.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Read this chapter on economic growth, which explains
why it is important for the government to define an appropriate
growth policy and sustain it over time.
Terms of Use: The article above is released under a [Creative
Commons Attribution-NonCommercial-Share-Alike Generic
License 2.5](http://creativecommons.org/licenses/by-nc-sa/2.5/deed.en).
You can find the original version of this
article [here](http://www.peoi.org/Courses/Coursestu/mac/fram15.html).

Lecture: YouTube: University of Lawrence: Paj Holden’s
“Macroeconomic Goals of the Government”
Link: YouTube: University of Lawrence: Paj Holden’s “Macroeconomic
Goals of the
Government” (YouTube)

Instructions: Watch this short video, which identifies the
government’s main macroeconomic objectives. Although this lecture
does not focus on how these goals are met, as we advance through the
course we will how the government does this through the
implementation of fiscal, monetary, and growth policies.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Link: AmosWeb’s *Encyclonomic Webpedia*: [“Resource
Markets”](http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=resource+markets) (HTML)
Instructions: This page highlights the characteristics that define
resource, product, and financial markets. It shows how they are
interconnected using the circular flow diagram, which we will study
in detail next. Ignore the last two subheadings (“Spotlight on
Labor” and “Natural Unemployment”), which will be covered later in
the course.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Link: YouTube: University of Lawrence: Paj Holden’s [“Circular Flow
of Income –
Macroeconomics”](http://www.youtube.com/watch?v=gaEY-p-21F8&feature=related) (YouTube)
Instructions: Watch this video to see how the circular flow diagram
is generated. For practice, draw the diagram on your own and test
yourself to see if you remember all the points that appear in the
diagram. Understanding the processes in the circular flow diagram
will be crucial for the understanding of future topics.
Watching this video should take approximately 9 minutes.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

<span lang="EN">Link: Econ100’s [“Chapter 4: Demand and Supply” and
“Chapter 5: A First Look at
Macroeconomics”](http://www.econ100.com/usa/mac5e/index.html) (HTML)
Instructions: Click on the “Quiz” tab on the left hand side menu
and then go to Chapters 4 and 5 to take the test. Please attempt
all four levels of the quiz for a thorough assessment of the
material covered in this unit.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.</span>